 |
Welcome To Evlithium Best Store For Lithium Iron Phosphate (LiFePO4) Battery |
 |
The Tesla 4680 battery program has once again become a focal point of industry debate after a dramatic contract reassessment by South Korean high-nickel cathode materials supplier L&F. What was once viewed as a cornerstone agreement symbolizing Tesla’s next-generation battery breakthrough has now been reduced to a fraction of its original value, sending shockwaves across the battery supply chain and capital markets.
In February 2023, L&F signed a multi-year high-nickel cathode material supply contract with Tesla and its affiliates. Based on raw material prices at the time, the agreement was estimated to be worth approximately KRW 3.83 trillion and was scheduled to cover deliveries from 2024 to 2025. However, on December 29, 2025, L&F disclosed to the Korea Exchange that the estimated contract value had been revised down to less than KRW 10 million—a reduction of nearly 99%. The sole explanation offered was a “change in supply volume.”
For nearly two years, this contract was widely regarded as L&F’s golden ticket to ride the growth wave of Tesla’s 4680 battery strategy. Its near-total evaporation has not only disrupted L&F’s earnings expectations but has also become one of the most tangible financial signals suggesting that Tesla’s 4680 battery rollout is encountering serious headwinds.
L&F provided minimal detail in its announcement, stating only that supply volumes had changed. Yet reports from global media outlets and industry analysts have helped piece together the broader picture.
According to sources cited by Reuters, the contract covered high-nickel cathode materials intended specifically for Tesla’s 4680 cylindrical battery cells. The supply period ran from January 2024 through December 2025, with deliveries primarily linked to Tesla’s Texas Gigafactory. These batteries were expected to support platforms including the Cybertruck and Tesla’s originally planned low-cost electric vehicle.
South Korean media further reported that after the contract revision, the remaining amount effectively covers only early-stage sample shipments. L&F emphasized that the adjustment was a mutual decision following shifts in the global electric vehicle market and changes in battery supply dynamics, rather than a unilateral cancellation.
Market reaction was swift and unforgiving. On the first trading day after the announcement, L&F’s share price dropped more than 7% intraday. The same contract that once boosted valuations and fueled optimism around aggressive high-nickel expansion has now come full circle, closing out at nearly zero value amid cooling EV demand and repeated delays in 4680 mass production.
In financial markets and online commentary, the collapse of the L&F contract was quickly branded as proof that “Tesla’s 4680 battery has failed.” While the headline is eye-catching, the reality is more nuanced.
Reuters linked the contract reduction to two primary factors. First, Tesla’s in-house 4680 battery production has scaled up more slowly than expected, with key processes such as dry electrode manufacturing proving difficult to stabilize at mass-production levels. Second, overall growth in U.S. electric vehicle demand has decelerated, reducing incremental demand for high-nickel battery cells.
Bloomberg took a model-centric angle in its report titled “The Cost of Cybertruck’s Failure for Korean Suppliers.” It highlighted that the Cybertruck—currently the only mass-produced vehicle using 4680 cells at scale—has underperformed initial sales expectations. As a result, upstream demand for high-nickel materials has been far weaker than anticipated, contributing directly to the hollowing out of L&F’s contract.
Public information aligns with these interpretations. When Tesla unveiled the 4680 battery at its 2020 Battery Day, the company promised dramatic cost reductions within roughly three years by combining larger cylindrical cells with dry electrode technology. These savings were meant to enable a mass-market electric vehicle priced around USD 25,000.
By the end of 2025, however, 4680 cells remain concentrated in a limited number of models, primarily the Cybertruck. Early Model Y variants equipped with 4680 batteries have reportedly been discontinued, while the affordable EV project has been revised or delayed multiple times.
Technically, Tesla continues to manufacture and deploy 4680 batteries. Teardown analyses suggest that the cells do deliver higher energy density through a high-nickel cathode system paired with advanced processes. Yet yield rates and cost reductions have fallen short of original promises. Elon Musk himself has acknowledged during earnings calls that scaling dry electrode production remains a “major challenge” and that the ramp-up pace is slower than initially envisioned.
Taken together, the L&F contract collapse does not mean the 4680 battery technology has fundamentally failed. A more accurate conclusion is that the high-nickel 4680 roadmap—once expected to simultaneously power Cybertruck growth and a low-cost EV—has been forced to slow dramatically or partially retreat in the face of manufacturing complexity and softer real-world demand.
The market shift behind L&F’s contract revision is also evident in Tesla’s evolving battery chemistry strategy.
On one hand, high-nickel batteries remain essential for premium vehicles and long-range variants. In the U.S. and Europe, certain Model 3 and Model Y versions, along with performance models, continue to rely on high-nickel NCA and NCM chemistries supplied by partners such as Panasonic and LG Energy Solution. Demand in this segment has not fundamentally reversed.
On the other hand, lithium iron phosphate (LFP) batteries—and other cost-controlled chemistries—are rapidly taking over the high-volume segment. In China and several export markets, Tesla’s standard-range models now overwhelmingly use LFP prismatic cells. In energy storage systems, Tesla has also clearly shifted toward LFP, collaborating with partners like LG Energy Solution to localize LFP production in the United States.
This strategic rebalancing mirrors broader macroeconomic conditions in the U.S. EV market. With interest rates remaining elevated and subsidy policies uncertain, consumers have become more price-sensitive toward high-ticket electric vehicles. Automakers across the industry have responded by cutting or delaying pure EV investments.
LG Energy Solution recently disclosed the cancellation or termination of contracts with Ford and Freudenberg, impacting orders worth more than KRW 13 trillion. These decisions were similarly attributed to adjustments in North American EV programs and policy uncertainty.
In this environment, high-nickel batteries are transitioning from a once-hyped “next-generation mainstream solution” to a more selective role focused on segments where performance and range command a premium.
For Tesla, this shift means tapping the brakes on high-nickel 4680 capacity expansion at the Texas Gigafactory, while accelerating global investment in LFP batteries and energy storage products optimized for cost efficiency.
The cooling of high-nickel expectations is also reverberating upstream in the nickel resource sector.
On December 26, Shengton Mining announced the termination of its planned 40,000-ton-per-year high-grade nickel matte project in Indonesia’s Weda Bay Industrial Park. The project, first launched in 2021 with a planned investment of approximately USD 245 million, was intended to supply battery precursor materials but never reached commercial production. The company has now dissolved the joint venture established for the project.
During the height of high-nickel optimism and Indonesia’s rapid expansion of nickel capacity, numerous projects were launched at breakneck speed. As nickel prices softened and margins tightened across parts of the value chain, unfinished or underperforming projects became the first casualties.
At the same time, Indonesia has signaled a shift toward tighter supply control. The government plans to reduce nickel ore production quotas in 2026 from roughly 379 million tons to around 250 million tons—a cut of nearly one-third—to stabilize prices and ease oversupply pressure. Following the announcement, both Shanghai and London nickel futures rebounded sharply.
Analysts interpret this move as a strategic pivot by resource-rich countries, transitioning from volume-driven expansion toward price stabilization and profit redistribution.
Viewed together, the evaporation of L&F’s contract, the cancellation of nickel projects, and Indonesia’s proposed production cuts represent synchronized adjustments across the battery ecosystem. They reflect a broader truth: the era of unconditional expansion driven by high-nickel battery expectations is giving way to selective contraction, recalibration, and a more disciplined approach to pricing and investment.
Edit by paco
Last Update:2026-01-06 10:12:42
All Rights reserved © 2026 Evlithium Limited